Thinking Ahead For The Hidden Home Expenses of Homeowning
By Nikita Wolff
Maybe your landlord just raised your rent for the 3rd time, and you’re starting to ask yourself: “Is renting really worth it anymore? I’m just throwing away this money after all”.
Many of us were raised with the belief that the financially successful purchase and own homes, while those who don’t are doomed to never get ahead. It may be why so many of our participants are pleasantly surprised to learn that a middle-ground on the rent/buy debate actually exists – and for good reason.
Hidden Home Expenses
Owning a home comes with a lot of hidden expenses, especially if you’re the type of person who wants to see the occasional home improvement project. Theoretically, if that additional money was invested rather than spent on home improvements, the renter could actually come out ahead of the person who owns a home.
As someone who bought a
lemon “fixer-upper”, thinking it would save me money, I have definitely had moments wondering if we made a mistake. Like last summer, when our roof and A/C both needed to be replaced within 4 months of each other. Ouch. This isn’t to say that non-fixer-upper homes never need bigger repairs. They eventually do. But it’s really important to know what you’re getting into and to use an inspector who has your best interest in mind (and not the seller’s). Big expenses are much easier when you can plan for them years in advance.
Pricing Big Home Expenses
Something we’ve learned while pricing out quotes from various companies & projects is that many companies offer financing, but will increase the price tag on the financed amount. Meaning, the quote you got for $10,000 cash might be $13,000 if you use a 3rd Party to finance it. Double whammy. I wish I could say this news surprised me, but it really didn’t. This is just one example of why it’s important to plan for the future (for stuff you know is coming) and have sufficient Emergency Savings (for stuff you don’t see coming).
Don’t Get Pressured Into Buying
When we entered into our ✨home buying era✨, our realtor was trying to convince us that we should do so from a financial perspective. Our studio rent was $550/month (this was 2018). We thankfully knew this wasn’t a logical reason to enter into the purchase of a home, but there were other motivators for us. Most notably, privacy, flexibility for how we customized our space, and the availability of a first-time home buyer’s program. We knew we were making somewhat of an emotional decision, but we also knew we could afford to.
Since we were working off of a budget already, we were aware of what our limitations were, and it made it easy to turn down our pre-approval offering for a mortgage that would have put our housing ratio around 30%. Unfortunately, it’s important to be guarded & to ask a lot of questions. If someone is steering you in a direction, make sure you consider if they have something to gain from following their advice (i.e. commissions). I wish this weren’t the case, but no one cares about your financial well-being as much as you do.
Factor ALL The Expenses When Considering Buying
If you are already finding it hard to get by with fixed-cost rent, and a Mortgage (including PITI payments) is not cheaper, it’s wise to look closely at your numbers and make sure that the variable expense of homeownership wouldn’t potentially derail your finances. Additionally, if you are the type of person who loves trends, redesigning your space, and upgrading things, just be sure you’re spending within your means.
Some of the bigger expenses to look out for include:
- Roofing (*$16,300)
- A/C (*$9,800 mini-split replacement)
- Gas (*$1,800 for full gas line replacement)
- Solar (*$14,600 financed)
- Walls/Fence Installation (*$9,440 for 166’ corrugated metal)
*I feel like I had no understanding of what things would actually cost as a homeowner, which is why I included the cost I personally incurred for the big projects I’ve had to take on. Keep in mind, I shopped around and got creative to cut costs on equipment & labor (i.e. paying in cash & using connections through family/friends).
A home warranty could also protect you, especially in those early years of home ownership when you’re still learning exactly what you’ve gotten yourself into. 😉